Recent Cases
Porter v. Nabors Drilling USA LP, ___F.3d___ (9th Cir. April 20, 2017), 9th Circuit case number 15-16985
Porter v. Nabors Drilling USA LP, ___F.3d___ (9th Cir. April 20, 2017), 9th Circuit case number 15-16985: Ninth Circuit Court of Appeals holds that Police Power Exception to bankruptcy automatic stay, 11 USC 362(b)(4), does NOT Apply to Suits by Private Attorneys General. Suits by private attorney generals (aka nongovernment individuals/entities suing as “private attorney generals”), against the bankruptcy debtor, are stayed by the bankruptcy automatic stay, and cannot proceed unless plaintiff moves for and receives relief from stay to proceed with the suit. Porter was a “private attorney general” suit seeking to enforce state labor laws. A suit brought…
Czyzewski v. Jevic Holding Corp., ___US___ 2017 WL 1066259
Czyzewski v. Jevic Holding Corp., ___US___ 2017 WL 1066259 (3/22/2017): US Supreme Court Strikes Down “Structured Dismissals” of Bankruptcy cases, if the terms of the “Structured Dismissal” of the bankruptcy case violate the priority scheme of the Bankruptcy Code: The United State Supreme Court in Czyzewski v. Jevic Holding Corp. held that “[a] distribution scheme ordered in connection with the dismissal of a Chapter 11 case cannot, without the consent of the affected parties, deviate from the basic priority rules that apply under the primary mechanisms the Code establishes for final distribution of estate value in business bankruptcies.” Importantly, the…
Opt-Out Lenders v. Millennium Lab Holdings II LLC (In re Millennium Lab Holdings II LLC), ___F.Supp.3d ___ (US District Court, District of Delaware 3/17/17)
Opt-Out Lenders v. Millennium Lab Holdings II LLC (In re Millennium Lab Holdings II LLC), ___F.Supp.3d ___ (US District Court, District of Delaware 3/17/17): US District Court for District of Delaware held Bankruptcy courts can’t issue final orders approving non-consensual third-party releases of non-bankruptcy claims, even as part of a Chapter 11 plan confirmation order. Without making a definitive ruling, a district judge in Delaware said that the US Supreme Court Stern v. Marshall case and its progeny preclude a bankruptcy court from entering a final order granting non-consensual third-party releases of non-bankruptcy claims, even as part of a chapter…
Tower Credit Inc. v. Schott (In re Jackson), 850 F.3d 816 (5th Cir. March 13, 2017)
Tower Credit Inc. v. Schott (In re Jackson), 850 F.3d 816 (5th Cir. March 13, 2017): US Supreme Court Won’t Decide a Circuit Split on Garnished Wages as Preferences The Supreme Court will not resolve a circuit split by deciding whether wages garnished within 90 days of bankruptcy are recoverable preferences. This morning, the high court denied a certiorari petition in Tower Credit Inc. v. Schott, 17-444 (Sup. Ct.), where the Fifth Circuit differed with three older circuit court decisions by holding in March that a wage garnishment resulted in a preference because the transfer was deemed to occur within…
Conflicting Outcomes, Between 2014 9th Circuit BAP Markosian v. Wu (In re Markosian), 506 B.R. 273 (9th Cir. BAP 2014), and 2 Bankruptcy Court Decisions from Other Circuits
Conflicting outcomes, between 2014 9th Circuit BAP Markosian v. Wu (In re Markosian), 506 B.R. 273 (9th Cir. BAP 2014), and 2 bankruptcy court decisions from other Circuits, which are In re Lincoln, BR ___, bky case number 16-12650 (Bankr. E.D. La. Feb. 8, 2017) and the 2015 Rogers v. Freeman (In re Freeman), 527 B.R. 527 (Bankr. N.D. Ga. 2015). The issue in all 3 cases is the same, and is this: When an individual’s chapter 11 case converts to chapter 7, does property acquired post-petition revert to the debtor or does it belong to the chapter 7 estate?…
Greif & Co. v. Shapiro (In re Western Funding Inc.), 550 B.R. 841 (9th Cir.BAP 2016) (“Greif”)
Greif & Co. v. Shapiro (In re Western Funding Inc.), 550 B.R. 841 (9th Cir.BAP 2016) (“Greif”): The U.S. Bankruptcy Appellate Panel for the Ninth Circuit (the “9th Circuit BAP”) held that the standards for approving a settlement agreement under Fed. R. Bankr. P. 9019(a) did not apply per se to a post-confirmation settlement agreement between a creditor and the liquidating trustee (the “Liquidating Trustee”), as liquidating trustees do not constitute “trustees” for purposes of the Bankruptcy Code and Bankruptcy Rules.
Wolf Metals Inc. v. Rand Pac. Sales, Inc., 4 Cal. App. 5th 698
Wolf Metals Inc. v. Rand Pac. Sales, Inc., 4 Cal. App. 5th 698 (2016), a published California Court of Appeals decision, the California Court of Appeal held that a judgment creditor could not amend a default judgment to add an additional individual judgment debtor under an “alter ego” theory, because doing so would violate that person’s due process rights, although adding a successor corporation to the judgment was permissible. Judgment creditors often want to add a nondebtor individual to a state court default judgment, because the corporation the judgment is against files bankruptcy, or is otherwise “uncollectible”. FACTS: Wolf Metals…
In re Rexford Properties, LLC, ___BR___, 2016 Westlaw 5416443 (Bankr. C.D.Cal.2016)
In re Rexford Properties, LLC, ___BR___, 2016 Westlaw 5416443 (Bankr. C.D.Cal.2016): A bankruptcy court in California has held that the separate classification of a group of trade creditors in a Chapter 11 plan had to be based on a “legitimate business or economic justification,” but the debtor did not have to show that the special treatment of that group was “critical, essential, or necessary” to the reorganization. [.] FACTS: A Chapter 11 debtor negotiated a reorganization plan, under which certain of its unsecured creditors (primarily trade creditors) would be separately classified. The members of that class would be paid in…
Midland Funding, LLC v. Johnson, St. Ct., No. 16-348
In Midland Funding, LLC v. Johnson, St. Ct., No. 16-348, appeal docketed Sept. 16, 2016: US Supreme Court in 2017 will hear and decide a bankruptcy case involving a debt collection agency and a consumer bankruptcy debtor. Issue is whether the Consumer Financial Protection Act prohibits a debt collection agency/creditor from filing a proof of claim, in a bankruptcy case, that is barred by the statute of limitations. More than two years into a litigation effort challenging the credit and collection industry’s practice of filing time-barred proofs of claim in consumer bankruptcy cases, all eyes are on the U.S. Supreme…
Blixseth v. Brown (In re Yellowstone Mountain Club, LLC), ___F.3d ___, 2016 WL6936595 (9th Cir. 11/28/2016)
Blixseth v. Brown (In re Yellowstone Mountain Club, LLC), ___F.3d ___, 2016 WL6936595 (9th Cir. 11/28/2016): In Blixseth, the Ninth Circuit Extends Barton doctrine, to Protect Creditors’ Committee Members In Blixseth, the Ninth Circuit Court of Appeals became the first US appeals court to hold that the Supreme Court’s Barton doctrine, barring suits against receivers and trustees without permission from the appointing court, also protects creditors’ committee members from claims based on actions taken within the scope of authority. The appeal involved Timothy Blixseth, former owner of the bankrupt Yellowstone Mountain Club LLC, who used some proceeds from a loan…